Utilizing demographic and lifestyle data has long been a tactic for marketers to target specific markets with a defined message and well-honed product or service and this data-driven approach is increasingly being employed by commercial real estate (CRE) investors and professionals to make sound investment decisions in the unpredictable climate.
Historically, CRE decisions may have taken into account crude demographic data around the population, age and income of an area, but technology has advanced and there’s now a wealth of sophisticated data on tap that extends to how people live and shop, what their interests and opinions are and what they do outside of work. Commercial real estate investors who harness all the data available to them with an unwavering attention to detail will prosper over those clinging to conventional due diligence.
Canada’s Changing Demographics
On a basic level, demographic data reveals which cities are likely to see population growth, a rudimentary indicator of real estate potential for growth. Canada has a growing but aging population; expanding at around 1% or over 331,000 people between 2019-2020 and growing by an exponential 7.15 million in the 20 years post-millennium. Unsurprisingly, population growth was suppressed by COVID during 2020 into 2021 as immigration (which accounted for 86% of all growth in 2019) was put on hold temporarily and many newcomers and temporary workers to the country were forced back to their home countries. Canada needs skilled technological workers for economic growth as indicated by expansion to immigration programs and population growth will continue as soon as free movement resumes.
Projected population change 2015-2050
Demographic and Lifestyle Impact on Commercial Real Estate
Aging Population
Expenditure and spending patterns change as an individual ages so recognizing areas with a higher proportion of over 65s enables decisions on facilities that might be incorporated into properties and neighborhoods. Many baby boomers retired early and started to downsize during the pandemic and despite stereotypical ideas of them spending their days in the drug store, this age category is healthier and more independent than ever and are looking for health and wellness facilities, energy-efficient homes, community activities and somewhere to store surplus belongings. Previously it may have been that this group spent much less on products and services in the surrounding area than younger demographics but that gap could be narrowing and it’s not to say they don’t spend, they just spend differently on things such as reading and subscriptions, fitness, travel and financial planning as opposed to frequenting bars and restaurants. Delving into their life and interests can help create the type of developments that give them added value and convenience in retirement years. Moving to later in life, as more and more of the aging population progress into managed housing, there’s a bigger opportunity to shape senior living of the future which is resilient to the serious threats experienced during the pandemic and covers a multitude of senior living needs whether it be adaptive single-unit housing or dedicated facilities with universal features which can house residents with very varied disability and mobility needs.
Household Formation Changes
In terms of both ownership and household members, households are changing. With an average Canadian salary just over $50,000 and rocketing house prices, home ownership is a fading dream for many. The affordable housing problem means people that would have transitioned to home ownership before are stuck in rental properties and until housing supply overtakes demand, prices will remain high. Many families are resorting to multiple generations pooling their funds and buying together to get onto the next step on the ladder.
The changing composition of households is muddying the waters for investors who rely on household size, income and occupation data to make decisions on spending power, particularly in the retail space - what’s crystal clear however is that changing circumstances provide opportunities for creative investors in affordable mixed-use property, which service the needs of diverse, multi-generational families from different income groups across life, leisure-time and business.
Workforce Changes
There’s little doubt that working women and those in lower income brackets have borne the brunt of COVID-related job losses, however initiatives to redress this have already been put forward by political leaders as a core manifesto in the upcoming election and more importantly, a way to revive Canada’s economy. Supplementing childcare costs may mean increased demand for child care facilities and innovative solutions to child care in or near to work settings, but whether women return to work in droves or not, the workplace is most certainly disseminating and getting smaller and more convenient. Smaller co-working spaces and live-work spaces are some of the emerging trends coming through which we would expect to continue as the gig economy widens.
Suburban Migration and Jobs
There are no longer rural communities with mainly ageing populations or suburban towns that house only young families. Lines are becoming blurred by migration out of major cities into the suburbs and even interprovincially as those who are able move further afield in search of cheaper housing. For investors, the challenge will be in predicting whether this reverses substantially post-pandemic but in any case it seems that there will be a level of intermingling that we haven’t seen previously between dedicated white-collar and blue-collar workers of the population as accelerated digitalization now demands a new class of worker who is technically adept no matter whether office or factory-based, highly educated or not.
CRE Trends that Become Reality
We’ve heard a lot about the new normal and trends shaping the commercial real estate landscape recently, however a lot of these trends are not trends at all, they’re long-lasting changes that have altered the way society lives and works irrevocably. If investors can use demographic and lifestyle analysis to build a picture of what society looks like both now and in the future, they may make accurate predictions on those trends that will become reality and move away from assumptive decisions allowing for more lucrative opportunities to present themselves.
At this point in time with new waves of a pandemic posing a real risk, it’s crucial that investors exhaust all of the current data available to them. Where and how people live remains fluid but armed with robust data and treating change as an opportunity to meet new types of demand is the best strategy for CRE investors.
Contact PCG today for further information on the trends and changes we see happening in Toronto and how we can help you access the data to capitalize on them with your next investment.
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